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Could the New Variant Of The Coronavirus Affect The Latin American Economy?

Omicron, the new variant of the Coronavirus, has the world on alert and Latin America is not exempt from this tension.

Piggy bank with dollar bills

The slow rate of vaccination, almost non-existent, in African countries; the new waves of infection outbreaks; anti-vaccine movements and the appearance of new variants have humanity in tension. Photo: Pixabay

LatinAmerican Post

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Leer en español: ¿La nueva variante del Coronavirus podría afectar a la economía de Latinoamérica?

Almost 2 years have passed since the start of the coronavirus pandemic, and yet the world seems to be far from stabilizing after the strong economic, social, and health shock. The slow rate of vaccination, almost non-existent, in African countries; the new waves of infection outbreaks; anti-vaccine movements and the appearance of new variants have scared the human race. 

To date, we don't know much about the new variant. However, the World Health Organization WHO classified it as worrisome because, according to studies that have been carried out, it has multiple mutations that appear to affect its ease of spreading and the severity of the symptoms it causes.

In this regard, several countries have decided to close their borders to the countries of southern Africa. In the American continent, almost all countries have already implemented restrictions on the mobility of passengers from certain African countries or mandatory quarantines. However, cases have already been confirmed in Latin America. The first three were detected in Brazil, according to the National Health Surveillance Agency - Anvisa .

But Omicron not only presents a threat to the health of the world, it will also be a new challenge for the world economy, especially for this area of the planet, which was already hurt by the first wave and the multiple restrictions that governments implemented to reduce its spread.

The World Bank has stated that “The world economy is experiencing an uneven recovery, and inequality is at risk of worsening and low- and middle-income countries lag behind. The trajectory of the COVID-19 pandemic remains uncertain, and in many countries, there are obstacles to vaccination. " Although at this time the African continent is the most vulnerable, Latin America is not far behind. The average vaccination rate in the countries of the region is 57%. However, while there are countries like Cuba or Chile with figures close to 80%, there are other countries such as Nicaragua, Venezuela and Bolivia with figures that are around 30%.

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With the announcement of the new variant, last November 26 the world economy reported sharp falls in the stock market. The worst thing is that weeks of uncertainty are coming in the stock markets while more data on this variant is achieved. In fact, a return to confinements, would give a strong shock to the economy, as this means paralyzing various production and supply chains, and ultimately slowing down the growth that is taking place.

In this sense, the scenario for Latin America would be very unfavorable. On December 2, the OECD Development Center, ECLAC, CAF and the European Commission launched their report called Latin American Economic Outlook (LEO) 2021: Moving Together towards a Better Recovery . Said report pointed out that the Latin American and Caribbean Region is the most affected and that the socioeconomic advances that had been achieved in recent years are being reversed due to the crisis caused by the coronavirus. In fact, the region's Gross Domestic Product (GDP) contracted by 7% and, according to projections, it will not return to pre-crisis levels until 2023 or 2024.

"Recovery strategies must include well-sequenced reforms that promote universal social protection systems, accelerate the formalization of economies, improve fiscal progressivity and deepen regional integration," said ECLAC. Likewise, the report suggests that strategic sectors such as the automotive, pharmaceutical, renewable energy, sustainable agriculture, and the circular economy be strengthened. In this way, a worsening of the pandemic due to the Omicron variant would put a brake on the agility with which recovery measures must be addressed.

The call to citizens and States is to accelerate vaccination processes, as they are essential to overcome the pandemic. On the one hand,  they prevent new strains from emerging and allow greater global control over the virus. On the other hand, it is essential to save lives and prevent the health system from going into crisis again. Despite the fact that all the data on the behavior of the virus are still unknown, the WHO has indicated that there is no reason to doubt the effectiveness of vaccines to protect against the new variant.